The message during the demo said "Your passcode is required to enable Face ID"

This indicates an error. When you have too many failed Touch ID attempts, the iPhone says "Your passcode is required to enable Touch ID"

After you restart your phone, the message is "Touch ID requires your passcode when iPhone restarts"

It totally failed, those guys repeat those demos for months and there is absolutely no way the phone was in such a state.

It looks like it unexpectedly rebooted prior to the demo as the message on the screen was something like "You must enter your passcode before using Face ID".

Something similar comes up on reboot for touch ID users. You have to enter your passcode once on startup to decrypt the storage where the fingerprint data is stored.

Should be pretty easy to find out in a replay or screenshot. If it was indeed after restart it’s not failed but a deliberate design decision.

what does your touch id do if you have doritos on your thumb, or your phone in the shower too long?

(it asks for your pin)

He went to the backup phone after and said as much, it clearly failed. No way that was intended behavior.